What is a variable energy contract?

In short, variable contracts mean that your per unit gas and electricity costs can change at the discretion of your supplier. Rates usually change if the cost of wholesale changes or if Ofgem changes their price cap. These contracts are usually open ended with no exit fee, so you can exit the contract easier. Because the rate can per unit can go up or down, you bill might fluctuate month by month, even if your usage doesn’t change. These prices can change at any time, but your supplier should give you warning beforehand.

While variable energy contracts have their benefits, there are other factors you need to consider. If wholesale prices go up, it’s likely that your unit rate and standing charge will increase. This could cause you to have incredibly high energy bills for months at a time. This can make it harder to budget as it can be difficult to predict how much your bill will be factoring in the price changes. If you’re choosing a variable contract, it’s best to keep an eye on wholesale prices so you can look at switching if prices are continuing to rapidly rise.

If you don’t want a variable contract, you could choose a fixed contract instead. With this type of contract, your unit rate and standing charge prices will be locked in with your supplier from the beginning of the contract until the end. Therefore, if your usage stays the same, your bills are more likely to be consistent, making it easier to budget if you’re keeping an eye on your usage. This contract will have a fixed end date and often exit fees if you’re wanting to leave the contract early. They usually last a year but can be as long as two to three years.